Decide if Tax Liens Are For You
Before you have to even decide to get involved with tax lien certificates, you should understand the rewards involved as well as the risks.
You must realise some typical terms and methods like bidding down the interest, bidding on the premium, bidding on the ownership and redemption periods. When you have a good grasp on the fundamentals of buying tax liens, you should decide if this is something that you would really like.
If you feel that being a tax lien investor is in your future, keep reading!
Find A Good Website For Purchasing Tax Liens
This is actually the easy part. Tax lien sales are processed at the courthouse so you should probably start by finding the website of tax collector for county you want to invest in.
Another option, use the famous google search engine and enter the county that you are interested in, followed by "tax collector". For example, if I wanted to invest in a county in Florida I would type in "Florida Tax Collector" in the Google search engine.
Using google will turn up a lot of results for tax lien investing and allow you to even sign up for a few auctions from the comfort of your couch.
Sign up With some Tax Lien Websites
Note: You will only be able to register in certain counties as not all counties have online tax lien sales.
You will be required to provide information such as your social security number or EIN (Employer Identification Number) if you will be purchasing the liens through a corporation. You may also need to fund or provide funding for your account which will be used to purchase the Liens if you win a successful bid.
Learn The Ways to bid on Tax Liens
There are different ways to bid on tax liens during an auction. One of several bidding methods will be used if more than one investor bids on the same property.
In the event that more than one investor seeks the same lien, depending on state law the winner will be determined by one of five methods: Bid Down the Interest.with this method, investors will bid against each other to see who will accept the lower interest rate. In some cases the interest rate can go as low as 0%, but this is rare.
Premium.With this method investors are fighting to see who will pay the most for the lien. Note that the amount bid over the original value of the lien may not earn interest. Colorado is one state that does this.
Random Selection.bidders are selected randomly when this method is used. It is common for a computer to do the random selection, however in smaller counties other methods may be used. Nevada uses the random selection method.
Rotational Selection. With this method, the first lien will be offered to the investor holding bid ticket number one. If this bidder refuses the lien, bid ticket number two may then bid. Bidder 1 will have to wait until all the other bidders have had a chance to bid before his or her turn comes up again. The bidding process continues in this sequential way until all the liens have been presented.
Bid Down the Ownership. This method is used in Iowa and a few other states, the investor willing to purchase the lien for the lowest percent of ownership on the property will be awarded the lien. For example, an investor may decide to take a lien on only 85% of the property. If the lien is not redeemed, the bid winner only receives 85% ownership of the property with the remaining 15% owned by the original owner. Not many investors will buy liens in states that use the ownership method.
So in case where multiple investors are bidding on the same property, the random selection process will be used instead. If a tax lien is not purchased at an auction, the county will take possession of it. Liens not sold at auction will then be available for "over the counter" purchasing.
Before you have to even decide to get involved with tax lien certificates, you should understand the rewards involved as well as the risks.
You must realise some typical terms and methods like bidding down the interest, bidding on the premium, bidding on the ownership and redemption periods. When you have a good grasp on the fundamentals of buying tax liens, you should decide if this is something that you would really like.
If you feel that being a tax lien investor is in your future, keep reading!
Find A Good Website For Purchasing Tax Liens
This is actually the easy part. Tax lien sales are processed at the courthouse so you should probably start by finding the website of tax collector for county you want to invest in.
Another option, use the famous google search engine and enter the county that you are interested in, followed by "tax collector". For example, if I wanted to invest in a county in Florida I would type in "Florida Tax Collector" in the Google search engine.
Using google will turn up a lot of results for tax lien investing and allow you to even sign up for a few auctions from the comfort of your couch.
Sign up With some Tax Lien Websites
Note: You will only be able to register in certain counties as not all counties have online tax lien sales.
You will be required to provide information such as your social security number or EIN (Employer Identification Number) if you will be purchasing the liens through a corporation. You may also need to fund or provide funding for your account which will be used to purchase the Liens if you win a successful bid.
Learn The Ways to bid on Tax Liens
There are different ways to bid on tax liens during an auction. One of several bidding methods will be used if more than one investor bids on the same property.
In the event that more than one investor seeks the same lien, depending on state law the winner will be determined by one of five methods: Bid Down the Interest.with this method, investors will bid against each other to see who will accept the lower interest rate. In some cases the interest rate can go as low as 0%, but this is rare.
Premium.With this method investors are fighting to see who will pay the most for the lien. Note that the amount bid over the original value of the lien may not earn interest. Colorado is one state that does this.
Random Selection.bidders are selected randomly when this method is used. It is common for a computer to do the random selection, however in smaller counties other methods may be used. Nevada uses the random selection method.
Rotational Selection. With this method, the first lien will be offered to the investor holding bid ticket number one. If this bidder refuses the lien, bid ticket number two may then bid. Bidder 1 will have to wait until all the other bidders have had a chance to bid before his or her turn comes up again. The bidding process continues in this sequential way until all the liens have been presented.
Bid Down the Ownership. This method is used in Iowa and a few other states, the investor willing to purchase the lien for the lowest percent of ownership on the property will be awarded the lien. For example, an investor may decide to take a lien on only 85% of the property. If the lien is not redeemed, the bid winner only receives 85% ownership of the property with the remaining 15% owned by the original owner. Not many investors will buy liens in states that use the ownership method.
So in case where multiple investors are bidding on the same property, the random selection process will be used instead. If a tax lien is not purchased at an auction, the county will take possession of it. Liens not sold at auction will then be available for "over the counter" purchasing.
About the Author:
To learn more about tax lien basics, then visit Dale Poyser's website to learnhow to buy tax liens online.
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